Using FCA To Go After DEI Poses Legal Hurdles For DOJ

Law360 quoted Michael Granston, chair of Covington’s FCA practice, on the legal hurdles the U.S. Department of Justice may face in using the False Claims Act to target allegedly unlawful DEI policies.

Michael noted that, unlike traditional FCA matters where there is a clear loss to the public fisc, the administration’s civil rights fraud initiative raises a fundamental question about whether the government failed to receive what it paid for when a contractor still delivered the contracted goods or services. “There’s a greater question about whether or not using the False Claims Act in this space is really advancing the primary purpose of the False Claims Act, which is to protect public funds, as opposed to perhaps advancing certain policy agendas or preferences.”

He also raised the additional hurdle of proving damages, questioning whether the government can demonstrate a loss when it received the core good or service it bargained for. “I think what we are seeing now is a greater willingness to inject policy preferences into False Claims Act enforcement, where those policy preferences are divorced from, or have a more tangential relationship to, losses to the public fisc,” Michael warned, cautioning that the FCA may continue to become even more politicized in the future if there are no guardrails in place in the form of having to prove materiality or connection to the public fisc.